The company is developing a significant compensation package for Sundar Pichai, Alphabet’s CEO. The overall payout could total roughly $692 million, depending on the performance of the company. Most of the compensation will be in the form of long-term stock options, in addition to the granting of Alphabet stock that will vest in three years.
The base salary for Pichai, at $2 million annually, is significantly less than the total value of the package due to the fact that much of his compensation will be based on achieving sustained growth in the company over time. Under Pichai’s leadership, Alphabet has grown significantly since 2015. As a result, the company’s market cap has increased from $535 billion to nearly $3.6 trillion today. Because of this trend, many of the shareholders will associate compensation with long-term performance.
Stock incentives tied to emerging technology units in the Sundar Pichai pay package
Alphabet created an incentive package with several components related to performance stock units. Analysts compare stock units against companies in the S&P 100 peer group. As a result, improved performance can produce between 2 and 4 times the stock payout, while poor performance could cause you to lose the entire award. Also, Alphabet has tied employees’ incentives to experimental divisions…such as Waymo, the company’s autonomous vehicle division, and Wing Aviation. Waymo’s stock has a target value of approximately $130 million and about $45 million for incentive compensation for Wing Aviation. Future values will depend on valuations of those businesses. Therefore, Alphabet is prioritizing growth in its emerging technology companies.
The package reflects competition for top technology leadership
Alphabet publicly came to the defense of the compensation plan. The board emphasised that the incentives would support shareholder interests. The officials declared that, “Further incentivisation of Mr Pichai is aligned with his own best interests as well.” Some of the successes that were cited were the Waymo and Wing projects. Furthermore, Mr. Pichai is responsible for leading much of the product development for Google’s largest products. Mr. Pichai previously led the development of Android, Chrome, and Gmail.
Additionally, Mr. Pichai was a Google employee starting in 2004. Today, Mr. Pichai is the CEO of Google as well as the parent company, Alphabet. The total compensation package of other technology CEOs is significantly less than Mr. Pichai’s. For instance, Satya Nadella recently received a total compensation of approximately $96.5 million. Similarly, Tim Cook received total compensation of about $74.3 million. This means Mr. Pichai has the potential to have one of the largest compensation packages in the world. The scale of the Sundar Pichai pay package highlights how major technology companies compete for leadership in fast-growing sectors such as artificial intelligence.
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